South Stream vs. Nabucco

Every hero needs an antagonist. So after the EU pursued the construction of the Nabucco gas pipeline, Russia planned South Stream. But the energy reality, not the political reality, is that neither project is really needed.

“Both of these projects are not number one priority for Europe and Russia and if we listen to our politicians, we can imagine that South Stream is number one question for Russia and Nabucco is number one question for Europe. This is very far from reality,” Konstantin Simonov, the general director of the Russian National Energy Security Fund, told New Europe on May 12 in an interview on the sidelines of the Athens Summit 2009 on climate and energy security.

Moscow on May 15 kicked started South Stream when delegates from Russia, Bulgaria, Greece, Serbia and Italy in Sochi signed agreements on the Russian-backed pipeline. Russian Prime Minister Vladimir Putin and his Italian counterpart Silvio Berlusconiwere among the top officials at the Black Sea resort.

“Russia wants to sign agreements with all these countries with Bulgaria, with Serbia and to show to Europe: ‘You see we have all these agreements and do you have agreements with Turkmenistan, with Georgia, with Azerbaijan, with Turkey? No? Okay, so we are in the first place,” Simonov said laughing.

Simonov reiterated his earlier remarks at the Athens conference, saying that neither the Russian plan for South Stream nor Brussels’ plan for Nabucco secure the diversification of supply.

“There will be another route but it’s not diversification of supply, it’s diversification of the routes,” he said. Solving the problem of Ukraine is much cheaper than the construction of these two pipelines, he explained.

Planning to substitute some gas currently crossing Ukraine, Italy’s ENI and Gazprom on May 15 in Sochi agreed to increase South Stream’s annual capacity to 63 billion cubic metres (bcm) from 31 bcm. Gazprom CEO Alexei Miller said South Stream would cost an estimated 8.6 billion Euro. Citing an earlier estimate of 24 billion Euro, Simonov said South Stream is an expensive project. “We have much more problems in our upstream today,” Simonov told New Europe, adding that this money may be better spent in Russia’s Bovanenkovo field on the Yamal peninsula and connecting it to an already existing system.

“Maybe it’s not a good idea to build South Stream.” Simonov also said that Nabucco will not give extra gas to Europe. “You can take the gas from Azerbaijan with the help of Baku-Erzurum pipeline ... so there is no need to build Nabucco if you want to have the gas from Shah Deniz on your market,” he said, adding that it’s possible to enlarge the capacity of the pipeline from Azerbaijan to Turkey.

Asked about future supplies from Shah Deniz Phase 2, Simonov said Miller is trying to buy this gas. “Putin wants to buy all gas in post-Soviet Union countries. There is no need in it,” Simonov said. Gazprom currently buys over 60 bcm of gas a year from Turkmenistan, Uzbekistan and Kazakhstan, he said. “This gas is for Ukraine and Europe and now we have no profit from reselling of this gas,” he said.

Simonov said both Nabucco and South Stream are political projects. “We must forget Nabucco and South Stream, but now unfortunately we have this political struggle between Russia and the European Union. That is why we see this battle of paper tigers because, in my opinion, there will be no South Stream and no Nabucco in 2014, but Russia wants to blackmail Europe with South Stream and Europe wants to blackmail Russia with Nabucco and we waste time, we waste money, we waste resources,” he said. “If you want to build something maybe it’s better to build one pipeline – South Nabucco - because there is no need in both of these pipes.”

By Kostis Geropoulos

Source: New Europe, May 17 - 23, 2009